February 9, 2012
Pennsylvania joins $25 billion joint state-federal settlement concerning "robo-signing" and other mortgage foreclosure abuses
HARRISBURG - Attorney General Linda Kelly today announced that Pennsylvania has joined a $25 billion joint federal-state agreement with the nation's five largest mortgage servicers over "robo-signing" and other abuses involving foreclosure and mortgage servicing.
"This settlement provides an estimated $266 million in assistance to Pennsylvania, including principal reductions for consumers struggling to avoid foreclosure, refinancing relief for homeowners who are 'underwater' - owing more than their homes are now worth - and payments to borrowers who lost their homes," Kelly said. "It also addresses breakdowns in the mortgage servicing industry, provides new protection against abuse and allows us to pursue other mortgage-related misconduct."
Kelly said the proposed agreement with Ally, Bank of America, Citi, JPMorgan Chase and Wells Fargo addresses concerns by state and federal investigators that loan servicers signed foreclosure-related documents without really knowing whether the facts they contained were correct.
"This agreement will provide critical relief to Pennsylvanians who were the victims of abusive foreclosure practices and provides future protections for homeowners to correct many of the problems that contributed to the mortgage and foreclosure crisis across the country," Kelly said. "The settlement will also provide the state with significant funds to be reinvested in our state."
Kelly said this joint state and federal settlement is the result of a massive and continuing investigation and included state attorneys general and state banking regulators from across the country, along with nearly a dozen federal agencies. She noted that since 2008, when the current foreclosure crisis began, the Attorney General's Bureau of Consumer Protection has reviewed more than 5,200 mortgage-related complaints from homeowners across Pennsylvania, covering 65 of the state's 67 counties.
The agreement holds mortgage servicers accountable for past mortgage servicing and foreclosure abuses and provides relief to homeowners. With the backing of a federal court order and the oversight of an independent monitor, the settlement is also intended to prevent future fraud and abuse.
Kelly said that Pennsylvania's share of the settlement is estimated to be as much as $266 million, including:
In addition to the financial terms of the agreement, Kelly noted that the settlement also creates an important set of mortgage servicing standards intended to protect homeowners; the creation of an independent monitor, who reports to the Attorneys General, to ensure compliance by mortgage servicers; the ability for the government to pursue a number of claims that are preserved under the settlement; and the ability for borrowers and investors, such as pension funds, to pursue individual, institutional or class action cases, regardless of the agreement.
U.S. Attorney General Eric Holder, U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan and a bipartisan group of state attorneys general announced the national settlement today in Washington, D.C. The final agreement, through a consent judgment, will be filed in U.S. District Court in Washington, D.C., and upon approval will have the authority of a court order.
"As this agreement is put into place, a settlement administrator and the mortgage servicers will work to identify homeowners who are eligible for cash payments, principal reductions and refinancing," Kelly said. "Eligible consumers will receive letters or claims forms as this process moves forward."
Kelly urged consumers to be patient, noting that the complexity of this agreement will require several months to implement.
Finally, Kelly advised consumers to be cautious about possible scams that may be linked to this settlement announcement.
"Con artists and thieves often use major announcements as an opportunity to engage in identity theft or financial scams," Kelly said. "Consumers should take steps to verify information before responding to any mailing, email or phone communication about this settlement."
Kelly said that many of the borrowers impacted by this settlement will be contacted directly by their bank or mortgage servicing company, while others may receive official notices from the Attorney General's Office or the national settlement administrator.
She encouraged consumers to closely monitor the Attorney General's website and the national settlement site for additional updates to help verify eligibility, contact the appropriate financial institution or to report problems.